tv Nightly Business Report PBS November 16, 2012 4:30pm-5:00pm PST
>> this is n.b.r. >> tom: i'm tom hudson. top democrats and republicans express optimism on avoiding the fiscal cliff after meeting at the white house. today. >> susie: i'm susie gharib. two big banks agree to pay millions of dollars over mortgage bonds gone bad. >> tom: and could it be the end of the twinkie? hostess brands shuts down after 85 years. the company blames a labor union strike. >> susie: that and more tonight on n.b.r.! >> susie: so far so good on the fiscal cliff.
president obama and congressional leaders got off to a good start in their first round of negotiations. the president met with congressional leaders who emerged later to say they want to move quickly to prevent automatic spending cuts and tax increases from tanking the economy at the first of the year. but as darren gersh reports, what we are not yet clear about is whether either side is willing to give up enough to get the job done. >> reporter: in washington, they think carefully about the pictures they want to present to the public so this mattered. all four congressional leaders-- democrats and republicans-- after meeting with the president chose to face the cameras together. that hardly ever happens and it reflects the new post-election mood of cooperation. house speaker john boehner called the meeting very constructive. >> i outlined a framework that deals with reforming our tax code and reforming our spending. and i believe the framework that i've outlined in our meeting today is consistent with the president's call for a fair and balanced approach.
>> reporter: to republican leaders balance means some higher tax revenues are paired with reductions in spending and changes in entitlement programs. that's a challenge for democrats, but the president seemed willing to move in that direction. >> our challenge is to make sure that we are able to cooperate together, work together, find some common ground, make some tough compromises, build some consensus to do the peoples business. and what folks are looking for-- and i think all of us agree on this-- is action. >> reporter: speaker pelosi suggested the leaders agree on milestones that will bolster the economy. >> we should have a goal in terms of how much deficit reduction. we should have a deadline before christmas. we should show some milestones of success so that confidence can build as we reach our solution. >> reporter: over the last week markets had grown increasingly pessimistic about avoiding the
fiscal cliff. today's tone provided some relief, but it's clear major hurdles remain. >> how much do rates have to go up? what can republicans accept on that and what can the democrats accept in terms of structural reform of entitlements? i think those are the two big sticking points and those are going to remain the sticking points. and if you can figure out what's going to happen there, you can figure out whether there is going to be a deal and when that deal might happen. >> serious negotiating begins after thanksgiving. susie. >> susie: you know, darren, you talked about the mood of cooperation, and listening to the various commentator today, you hear words like "encouraged, hopeful," and there's a feeling of. >> constructive. >> susie:-- that they are going to get a deal $m9é is that fair enough? is there going to be a fiscal cliff deal now? >> i don't know that you can say that based on this one initial discussion. i mean, it's still a heavy lift. there's lots they have to do. the best-case scenario seems to
be they will get some kind of deal and, you know, it was more optimistic today. so maybe the alds are slightly more they'll get a deal. but it's still a heavy lift and the odds of failure can't be dismissed gliz everybody keeps talking about the deal, the deal. what will be in the deal? you talked about something with taxes and entitlements. tell us about what we can expect on taxes? >> right, let's get to the substance. that's what this is all about in the end, right? >> susie: right. >> on taxes, it is possible-- there's some wiggle room here. the president could agree to perhaps say, instead of raising taxes on people make $250 and more, maybe lift that to 300, 400, 500, i've heard even a million. there's flexibility there. he could decide from raising rates to 35% to 40% to go to 37%, 38%. there's wiggle room, depending on whether the president thinks he's going to get enough on
other things. >> susie: maybe it's not so black and white. what about with entitlements? what can we expect? >> there's actually a lot more on the table on entitlements and i think a lot of people may be surprised whose coming there if they get a big agreement on taxes and entitlements. for example, one thing is a lot of economists say we could do a better job of estimating inflation if we put in and used a better inflation estimate. then you'd save money on social security benefits. you'd raise a little bit more on taxes because o-of-the-way our system works. that could be a very big deal. one of the most controversial is whether or not to raise the retirement rate or eligibility rate, say, for medicare. very controversial. democrats are opposed to that. it will be hard to get through. it might be possible. it can't be ruled out. and there are also other ways to change the means test maybe for some medicare. there's a lot that can be done there. i don't think it's been explained to the american people
what that would entail. so that's going to be a big issue to explain why they're doing all this. >> susie: complicated to explain and as you say, very controversial. thanks a lot, attorney. darren gersh reporting from washington. >> thanks, susie. >> tom: optimism about a quick resolution on the fiscal cliff boosted stocks on wall street today. but, the gains weren't enough to offset the week's losses. the dow added nearly 46 points. the nasdaq tacked on 16 and the s&p 500 was up about six. for the week, the dow and nasdaq each lost 1.8%, while the s&p 500 fell 1.5%. and, as suzanne pratt reports, investors should buckle in for what is expected to be volatile trading in the weeks ahead. >> reporter: the last eight days have been rough for the stock market. but, given those are the same eight days since the u.s. election, it doesn't take a geniuso figure out what's put investors in a funk.
it's all about what's happening 200 miles from wall street. negotiations between the white house and congress are holding equities hostage. >> we are right now pricing in the instability of policymaking. politics are very difficult to forecast. if you think markets are difficult to forecast, try forecasting politics. >> reporter: if discussions are at impasse, stocks sink as they have for the past several days. if progress on the fiscal cliff is constructive, the market gains ground. but, floor broker doreen mogavero thinks today's gain were technical. >> i think honestly people were covering shorts. i don't think it was very euphoric rally where people were saying oh good now we can move on. i think people were saying better not be short going into this weekend in case the come up with a template for a deal before thanksgiving. >> reporter: prior to the election, the s&p 500 was up an impressive 13% for the year. as of today, those gains have been trimmed to just 7%.
still, some strategists say the recent market volatility may be less centered in the nation's capital and more in year-end nervousness. don't forget europe's financial crisis is far from over and now there is fresh trouble in the middle east. but, there's also concern the likely near-term fiscal cliff solution will be to delay a grand compromise, resulting in a less than ideal environment for stocks. >> that means you'll get some uneasiness extending into 2013. it won't have the cliff aspect at least in the first half of 2013. so, the can is kicked down the road. you'll have more like a simmering uneasiness waiting for washington to stay focus and arrive at a compromise. >> reporter: as to whether a solution on the fiscal cliff will result in a rally for stocks here on wall street. experts say the answer to that is yes. suzanne pratt, "n.b.r.," new york. >> susie: still ahead, a major deadline gets pushed back for
health insurance exchanges, a key part of president obama's health care reform. >> tom: lunch box staples for generations of kids could be history. hostess brands-- the maker of twinkies, ho-hos and wonder bread wants to sell everything to liquidate the company and go out of business. it's asking a bankruptcy court for permission. as diane eastabrook reports the move follows months of financial problems and labor un-rest. >> reporter: hostess brands says it decided to liquidate after a strike by members of the bakery, confectionery, tobacco workers,
and grain millers international union crippled production at several plants. the workers walked off their jobs a week ago protesting pay cuts and benefit concessions the company demanded in order to exit bankruptcy reorganization. >> it's a shock for a lot of us. we are actually people who want to work, but we are tired of this company's way of constantly lying to us. >> reporter: hostess had already reached a deal with the teamsters union. the irving, texas company filed for chapter eleven in january-- the second time in less than three years. hostess operates nearly 1,200 bakeries, distribution centers, and outlet stores in the u.s. the 82-year old company employs about 18,000 people. many iconic hostess brands could continue to live on after the company's demise. it says it wants to sell as much of its infrastructure as possible. diane eastabrook, "n.b.r.," chicago. >> susie: our next guest says don't panic, twinkies will not disappear. he's jeffrey sonnenfeld,
professor of management at yale university. you know, jeff, all across the country, people were going into twinkies withdrawal. there was a lot of talk on twit perwhere you could find some twinkies. you think that somebody is going to buy twinkies. who do you think it could be, and can they really make a go of it? >> well, i do think, like samuel clemmenes, mark twain said, the rumors of my demise are premature. i don't think these products are disappearing, even if the hostess company might go to a different stage of life. twinkies of course likewise in our lore, whether or not people were enraged and did violent things, supposedly, with this product. many confectionary companyes, almond joy, the different peter paul products lived on as herschs managed to give them a
new life, companies like quaker city confectionary company disappeared but good and plenty lived on. it might be a private equity firm short term, lose of susie. it might not immediately be one of the food companies in the food business. you don't want to alienate the customer base. want to find some way where the brand is brought back to life. we have seen the schwinn, nautilus found a new direction for them in the recreational equipment business. there are ways of repositioning them. >> susie: it's interesting, most of the products you mentioned -- almond joy and there's also sugar babies, cracker youkilis what is it about food? >> those are welchs products. >> susie: why is it that food products survive as brands and less so other products? >> well, some of the products that can survive, if there's a
tangible consumer connection, like with schwinn brought back to lif or something like the food products-- as you mentioned, the welchs candy, part of what they offer is that there is a connection with a legacy. there's maybe a nostalgia, perhaps some sort of a sense of a retrochic that helps but there also has to be an welcome factor. say treatmento lay take everything on crackerjack, they have a way of getting it out there in a much more cost-effective way but you don't want to denigrate the brand while doing i jaguar was brought back to life with ford. ford of course has sold it since. they reinvested in it and made it a better product. if it's something like the retail stores, a woolworth that disappeared, or some of the bradlees, gimbals, dayton hudson, with a consolidation
through technology, the retailer wasn't bring us that product. it was just a distribution mechanism that somebody could do cheaper. >> susie: jeff i'm going to have to leave it there with you. i'm se americans everywhere are hoping twinkies will be one of the success stories you just talked about. jeffrey sonnenfeld of yale university. >> tom: two people are missing and about a dozen are injured after an explosion today on a black elk energy oil and gas platform, according to the u.s. coast guard. a fire started when sparks from a torch hit a storage tank on the platform. the platform is located in
shallow water about 25 miles off the coast of grand isle louisiana. the houston-based company says about 16 barrels of oil leaked and that it was not producing oil or gas when the fire started. last month black elk announce plans to start drilling about 20 new wells in the gulf of mexico. >> susie: j.p. morgan and credit suisse will pay more than $400 million combined to settle claims stemming from mortgage bonds gone bad. the securities and exchange commission accused the two of mis-leading investors in bonds backed by home mortgages. j.p. morgan will pay $297 million. credit suisse's fine is $120 million. neither bank admits nor denies the claims. most of the allegations centered around the banks keeping cash they were paid by mortgage originators when loans went bad, instead of passing those payments along to investors in the mortgages. >> tom: it was the best single day for stocks since election day with stocks moving higher on the optimism out of washington. it was just before noon eastern
when the s&p 500 moved into positive territory, but traders and investors clearly remain nervous with a slight afternoon swoon in prices before closing higher by a half percent. trading volume picked up. 946 million shares on the big board. just under $2.2 billion on the nasdaq. some of the sectors hardest hit in this post-election sell off led the rally. utilities up 1.1%. health care and consumer discretionary sectors gained 0.7% eh. utility stocks have really been hit this month. among the taxes due to go up next year are the taxes on dividends and the utility sector is an industry known for paying dividends. the utility exchange traded fund has seen trading volume pick up this month as it has fallen from $37 to below $35. today it gained 0.8%. we'll have more on the dividend cliff next week here on "n.b.r." the computer industry is dealing with its own threats: tablet computers and smart-phones. dell has seen its profits drop for four quarters in a row. last night's results were disappointing. shares were tumblintoday, do 7..
volume more than tripled. shares have now fallen to their lowest price since their recession low in the spring of 2009. dell's troubles hit hewlett packard shares too. both have seen pressure building on their traditional desktop computer business. h.p.q. shares fell 1.8%, closing at more than a decade low. hewlett updates shareholders tuesday with its quarterly results. one bright spot in pre-holiday retailing looks to be video games. activision and microsoft have each released update versions of best-sellers and they have become best sellers themselves. activisioblizzard shares jumped 4.6% thanks to its "call of dut: black ops 2" game selling $500 million in its first day. microsoft's "halo-4" game also has seen strong demand in its first week of sales. video games are a relatively small portion of microsoft's business. shares were down a half percent. video game retailer game stop looks to be an early winner of video game demand. shares jumped 4.3% closing at a new 52 week high.
this led the consumer sector today. meantime, best buy is waiting to hear from founder richard schulze about whether or not he will make a buy-out offer. his 60 day period to look at its books comes to an end soon. shares sank 9.8% to a new multi- year low after an analyst at citigroup said turnaround efforts may not be enough to fight back against online competition. best buy reports its quarterly results next week. sears holdings shares fell off the shelf, down 18.8%. volume sky-rocketed after reporting sales at stores open for at least a year continue to weaken. facebook continues seeing heavy trading volume and buyers despite hundreds of millions of new shares becoming available to trade this week. the worry is that amount of stock would hurt prices, but today's 6.3% gain takes the stock to its highest price since july. all five most actively traded exchange traded products were up. the russell 2,000 fund led the
way gaining 0.8% and that's tonight's market focus. )j >> susie: state governors got an extension today on making the final decision on health insurance exchanges. today was supposed to be the deadline, but late last night the federal government gave states more time to make this important choice on whether they want to create their own health insurance exchanges or have uncle sam do it for them. sylvia hall reports. >> reporter: in a letter late thursday, health and human services secretary kathleen sebelius delivered the news some republican governors wanted to
hear. they have until mid-december to decide if they'll build state- run health insurance exchanges. republican governors wrote a letter this week requesting the deadline be pushed back. the exchanges will be central places where people without insurance or small businesses can shop for coverage. they are a central facet of health care reform. supporters call them the key to keeping health insurance affordable and available to everyone, by expanding the number of people with health care coverage. but they've drawn heavy criticism from republican governors who worry the exchanges carry daunting administrative costs and federal law regulates them too tightly denying states the flexibility to set up exchanges their way. many of them hoped they'd never have to make the call, but now that president obama has been re-elected the future of health care reform is more certain leaving some states scrambling. states who plan on building exchanges must opt in or out of the exchanges by december 14, along with blueprints for the project. states who plan to partner with the federal government have until february to give their notice. sylvia hall, "n.b.r.," washington. >> susie: next week on "n.b.r.," we'll have more on health care and look at which stocks will be the winners and losers as
companies gear up for president obama's health care insurance mandate. how much do retailers benefit by opening early for those black friday sales? we'll find out if longer hours add up to bigger profits. and we look at ways investors are putting their money to work to better their communities. >> tom: with 45 days before the end of the year, lawmakers say they will speed up their negotiations over avoiding the fiscal cliff. is the time now for fast action by investors? jack ablin is the chief investment office at b.m.o. harris private bank. he joins us from chicago. how about it here, jack? what is the strategy over the next six weeks as these negotiation continue? >> you know, it's a pretty emotional strategy, tom, just because i think the downdraft, the 5% slide that we've endured since the election is, i would say, arguably pretty emotional. it's one of these tngs if ou
want to speculate and think the news will turn out fine, go ahead. that would be my inclination. i think that lawmakers get it. they need to be able to come up with some kind of compromise, even if it's a temporary one by year end. >> tom: in the meantime, look for some volatility. >> you're looking to put some money to work overseas with your vanguard emerging markets e.t.f. picks, v.w.o. is this-- it seems to be a pretty risky bet considering whether or not the u.s. can avoid the fiscal cliff, could have an impact overseas. >> it certainly could, tom, but i think it's actually what we've been doing incrementally is moving money away from the u.s. and into the emerging markets for a couple of rains. one, the easiest one is because at long last, emerging markets are tragd at roughly a 20% discount to the u.s. they just got so closely intertwined with europe that they kind of got caught in some of that downdraft.
and at the same time, unlike the expuz unlike europe, a lot of these countries have the financial wherewithall and the monetary firepower to actually continue to stabilize their economies if we corun into some rough water. >> tom: a lot of those emerging markets have been looking inward for growth as oppose stod trying to trade growth and export it. you're also looking at p.g.x., for the preferred portfolio e.t.f.. with dividend taxes o taxes on the fiscal cliff, how concerned are you, here? >> in fact, in theory, because preferreds are not subject to the same dividend tax and don't enjoy the same dividend benefits common stock, i wonder if maybe we're going to see flows out of common stock dividends and into preferreds as investors get worried that the tax rate could go up. it's a good way to collect-- kick the can, collect some good income, and perhaps we could see a boost out of common stocks and into preferreds.
>> tom: last time we saw in march 9 we liked a couple of energy plays, weps natural gas. chesapeake energy has continued to just dwindle in price down about a third from where you first chose it. exxonmobil meantime up about 2.5% pup still like either of these, jack? >> i do. i think long term natural gas is going to be one of the key ingredients to revive our growth. i think natural gas and some of the other fossil fuels have come under attack, especially under this new administration, so i think we're going to have still a nice tailwind for this longer term. >> tom: jack, do you own everything we mentioned tonight? >> well, i own the two e.t.f.s. i do not cone the common stock. >> tom: jack ablin wth b.m.o. harris private bank. >> susie: when it comes to standing out in the workplace, one of the keys of climbing up the corporate ladder is knowing when to take the reins. this week lou's been thinking about "white spaces." here's author and educator lou heckler. >> i have always been intrigued
by peak performers-- those who innovate and change the way we think on a consistent basis. in robert kelley's book, "how to be a star at work," he lists a series of traits about top performers. i just want to cover one of them: taking the initiative in ideas and actions. i spend a lot of time with managers and leaders from fortune 500 companies. i always ask them, what is missing from the fresh faces you hire these days? almost invariably, they talk about people who can follow well but don't know how to take the lead. here's what some of the best minds tell us initiative-takers do. first, they readily look for problems to solve. when no one else wants to jump into a tough spot, they step forward. second, they look for the white spaces. they don't just look at what's in front of them. instead, they ask, what's missing here? third, they persist, even when nay-sayers abound. you know the drill: there's always going to be someone when you do take initiative saying, do you really think we should be the first? or worse still, "hey, joe, hold back. you're making the rest of us look bad!" victor hugo said, initiative is doing the right thing without being told. are you ready? i'm lou heckler. >> susie: it's going to be a big
that's "nightly business report" for friday, november 16. good night, tom and everyone. >> tom: goodnight, susie. we'll see you online at nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.